Question

Sheffield Company purchased machinery on January 1, 2020, for $93,600. The machinery is estimated to have a salvage value of $9,360 after a useful life of 8 years. Compute 2020 depreciation expense using the sum-of-the-years'-digits method.

Answer 1

Answer:

Depreciation for 2020 is $18,720

Explanation:

Sum-of-the-years'-digit method is computed as follows:

FORMULA:

 Number of years of estimated life

remaining at the beginning of the year  x (Cost of an asset - salvage value)

                           SYD

SYD = n(n+1) / 2

where n is the estimated useful life of an asset.

SYD = 8(8+1) / 2

SYD = 8 x 9 / 2

SYD = 36

To compute for the depreciation expense for 2020, the computation is,

No. of years of estimated remaining life of an asset / SYD x (Cost of an asset - salvage value)

8 / 36 x ($93,600 - $9,360)

= 0.22222 x $84,240

= $18,720